Govt loses Rs 20,000 cr a year

The poor man's fuel, kerosene - paid for by state subsidy - is diverted to adulterate diesel mostly for truckers. And the industry is estimated to be worth half the sum the Centre spends on employment for rural poor every year.

Welcome to the Great Indian Kerosene Racket, which on Tuesday claimed the life of additional collector Yashwant Sonawane of Maharashtra's Nashik district in an attack by pilferers he caught red-handed.

Sonewane was trying to stop diversion of kerosene, which is sold to the poor through the public distribution system.

Oil industry experts say this illegal industry is worth more than Rs 20,000 crore, half the amount the state spends under the National Rural Employment Guarantee Act.

Kerosene is an easy adulterant because it costs Rs 12.37 a litre - after the government pays a Rs 20-a-litre subsidy - while diesel is priced at Rs 37.75 a litre and petrol Rs 58.37 a litre.

"An estimated 40-50% of the 10 million tonne of kerosene the government annually allocates to states is diverted once it leaves oil company depots," said an oil company official.

That translates into an illegal industry worth Rs 21,000 crore, based on the black market price of Rs 31 per litre of kerosene.

Petroleum minister Jaipal Reddy has announced a three-pronged strategy to fight the mafia.

This includes reintroduction of a chemical marker in kerosene; GPS-based tracking of trucks from oil depots to fair price ration shops and online updates on quantity of fuel and time of departure of trucks.

A study by the Indian Institute of Management, Ahmedabad for Petrofed, the apex oil industry body, found that kerosene meant for the poor simply doesn't reach them. It suggested 40% of the fuel was siphoned off.

But that was in 2006. Government officials now put the figure at 50%.

"Lower kerosene prices create options for diversion. Besides hotels and restaurants, low-priced kerosene could be diverted for industrial use and for generating electricity through portable gensets," the study said.

"Adulteration of other fuels, especially diesel, is another possibility."

Cheap fuels are a dubious business.

In 2000, the CBI arrested Ramar Pillai, who created a sensation by inventing what he called a 'herbal fuel', on charges of cheating the public by selling industrial organic chemicals as herbal fuel.